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South Korea: Crypto-airdrops might soon be subject to Gift Tax

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According to a report by South Korean news agency Yonhap News, virtual asset transfers for free are subject to gift tax. This, as per the guidance of the Ministry of Strategy & Finance in the country. 

Only last month, the ministry had postponed its decision to tax asset gains tax to 2025.

Cryptocurrency transactions to be taxed

In response to a tax law interpretation enquiries, the government said that a free transfer of a virtual asset (cryptocurrency) would be considered a gift under the Inheritance and Gift Tax Act. Ergo, they would be taxed accordingly. 

A number of free cryptocurrency transfers, including virtual asset airdrops, staking rewards, and hard fork tokens, would be subject to gift tax in South Korea.

An asset airdrop is a promotional activity in which small amounts of a new cryptocurrency are sent to different wallet addresses for free in order to generate awareness about the new entrant. A virtual asset can be staked to earn a reward of additional tokens over time. A hard fork entails the creation of assets that are transferred to different wallets to be transacted on the new infrastructure.

All such free transactions would be subject to a gift tax in South Korea, as per this clarification.

Yonhap News added that in South Korea, a gift tax is levied at a rate of 10-50%. Anyone obligated to pay the said tax must file its return within 3 months of receiving a gift.

The government, however, added that whether a specific virtual asset transaction is subject to gift tax or not is a matter to be determined in consideration of the transaction situation. Such as whether it is a consideration or whether actual property and profits are transferred.

Previous government attempts to tax cryptocurrency 

The South Korean government has time and again attempted to introduce taxation in relation to cryptocurrency. Alas, it has been a difficult journey. Reuters reported in April last year that the country’s finance minister Hong Nam-ki had said that the government will start taxing capital gains from trading of cryptocurrencies beginning 2022.

“It’s inevitable, we will need to impose taxes on gains from trading of virtual assets,” he said. 

It was reported in July last year that the government postponed its decision to tax virtual asset gains to 2025. It did so, citing the lack of clarity about regulations, customer regulations, and stagnant market conditions. 

The latest development is therefore consistent with the will of the government to tax cryptocurrency transactions as it is working to formulate regulations regarding virtual assets. 

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Saman Waris works as a News Editor at AMBCrypto. She has always been fascinated by how the tides of finance and technology shape communities across demographics. Cryptocurrencies are of particular interest to Saman, with much of her writing centered around understanding how ideas like Momentum and Greater Fool theories apply to altcoins, specifically, memecoins. A graduate in history, Saman worked the sports beat before diving into crypto. Prior to joining AMBCrypto 2 years ago, Saman was a News Editor at Sportskeeda. This was preceded by her stint as Editor-in-Chief at EssentiallySports.
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